Stauffer v. Standard Brands Inc.

• Decision Date: 14 December 1962
• Citation: 41 Del.Ch. 7,187 A.2d 78
• Parties: Joseph S. STAUFFER and Annabelle Stauffer, Appellants, v. STANDARD BRANDS INCORPORATED, a Delaware corporation, Michael J. English, Joseph H. Hoyt, Ralph J. Lisman, Joel S. Mitchell, and Henry Weigl, Appellees.
• Court: Supreme Court of Delaware

Page 78

187 A.2d 78

41 Del.Ch. 7

Joseph S. STAUFFER and Annabelle Stauffer, Appellants, v. STANDARD BRANDS INCORPORATED, a Delaware corporation Michael J. English, Joseph H. Hoyt, Ralph J Lisman, Joel S. Mitchell, and Henry Weigl, Appellees.

Supreme Court of Delaware.

Dec. 14, 1962.

Appeal from judgment of the Court of Chancery of New Castle County dismissing plaintiff's complaint. Affirmed.

Alexander L. Nichols and Richard H. Allen, of Morris, Nichols, Arsht & Tunnell, Wilmington, for appellants.

Richard F. Corroon, Berl Potter & Anderson, Wilmington, for appellees.

SOUTHERLAND, C. J., and WOLCOTT and TERRY, JJ., sitting.

SOUTHERLAND, Chief Justice.

This is a suit by a minority stockholder of Planters Nut and Chocolate Company, a Delaware corporation, attacking the validity of the merger of that corporation into Standard Brands on the ground of constructive fraud. Standard Brands moved to dismiss the complaint and the Vice Chancellor granted the motion. Plaintiff appeals.

This case involves the so-called 'short merger statute'. 8 Del.C. § 253. As recently amended it permits the merger of a ninety-per-cent owned subsidiary into the parent corporation by the unilateral act of the board of directors of the parent. The statute permits the parent to pay in cash for the minority interests. Each minority stockholder of the subsidiary must be given notice, and, if dissatisfied with the treatment accorded him, may demand an appraisal.

The factual background of this case is fully set forth in the opinion of the Vice Chancellor. See Del.Ch., 178 A.2d 311. In brief, Standard Brands, having acquired more than 90% of the stock of Planters Nut and Chocolate Company, a Pennsylvania corporation, created Planters of Delaware and merged the former into the latter on a share-for-share exchange under the provisions of § 252 of the corporation law. The notice of the meeting advised the stockholders that thereafter Planters of Delaware would be merged into Standard Brands under the short-merger statute. This was subsequently done. The merger provided for the payment in cash to the minority of $105 a share. This figure is $10 less than paid by Standard Brands for a block of about 50% of the stock of Planters of Pennsylvania (after litigation), and the same figure that was paid by Standard for more shares subsequently acquired.

Plaintiff, because of absence from the country, did not learn of the merger until the expiration of the statutory time of twenty days within which to demand appraisal. He thereafter brought this suit.

The claim is that the cash offered--$105 a share--is so grossly inadequate as to constitute a constructive fraud upon the minority. The real value is said to be at least $150 or $160 a share.

The complaint, of course, contains conclusory allegations of oppressive treatment of the minority by the parent corporation, and a prayer that the merger be set aside. But it is plain that the real relief sought is the recovery of the monetary value of plaintiff's shares--relief for which the statutory appraisal provisions provided an adequate remedy. The Vice Chancellor held that in the circumstances of this case that remedy was exclusive. His analysis of the facts and the law was thorough and well-considered, and we agree with it. It would be superfluous for us to repeat it.

We do, however, notice an argument made to us that was not made below.

In holding that plaintiff's statutory remedy of appraisal was exclusive the Vice Chancellor cited and followed the decisions of the New York Courts in Amella v. Consolidated Edison Co. of New York, Sup., 73 N.Y.S.2d 263, aff'd 273 App.Div. 755, 75 N.Y.S.2d 513, appeal denied, 297 N.Y. 1031, 78 N.E.2d 868; and Beloff v. Consolidated Edison Co. of New York, 300 N.Y. 11, 87 N.E.2d 561. Since our short merger statute is...